Care.com IPO Launches Strong

CRCM is up 40% in today's trading

Care.com (CRCM), which operates an online marketplace for caregivers, pulled off its IPO by issuing 5.4 million shares at $17, which was above the expected $14 to $16 price range. And so far in today’s trading, CRCM stock is up another 40%.

Care.com is the mastermind of Sheila Lirio Marcelo. She was part of the “sandwich generation,” which meant having to care for both her children and parents. She faced lots of challenges finding quality care solutions, so she wondered: Could technology help?

It could, of course, and Marcelo launched Care.com in 2006, getting instant traction. In fact, it is now the largest player in the space, with 9.7 million members spanning 16 countries. The main services include child care, senior care, special needs care and even pet care. There are also service offerings for tutoring and housekeeping.

In other words, as Care.com has expanded its platform, the company has taken on players like Angie’s List (ANGI), all of it leading to the Care.com IPO.

Care.com’s core functions include advanced search capabilities, ratings, messaging tools and background checks. But there are also ad-on features that have helped to boost growth, including an electronic payments system and a tax preparation service.

Yet the main revenue source is subscription payments, which have grown at a rapid clip. From 2010 to 2012, revenues soared from $12.9 million to $48.5 million. As for the first nine months of 2013, revenues spiked by 81% to $32.6 million. However, Care.com continues to post losses, which came to $24.7 million last year.

But going forward, there should be no lack of opportunity to keep fueling CRCM stock. Let’s face it, the addressable market is massive, as roughly 42 million households in the U.S. have enough income to afford caregiver services. There are also several strong trends that should help boost demand: the growth in dual-income and single-parent households, the aging population and the preference for home care.

As seen with other online marketplaces, such as eBay (EBAY), there are often huge advantages for the first-mover. Such a company can build a powerful brand and also an extensive network of buyers and sellers, making it tough for competitors to get an edge.

So far, it looks like Care.com has been able to pull this off, and in the wake of the Care.com IPO, CRCM stock may be a long-term winner for investors.

Based in Silicon Valley, Tom Taulli is in the heart of IPO land. On a regular basis, he talks with many of the top tech CEOs and founders trying to find the next hot deals and finding out which start-ups are stinkers.

A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.

Tom is routinely quoted in the media about upcoming deals with his interviews on CNBC and Bloomberg TV, but he is eager to take your questions too. You can message him on Twitter at @ttaulli. And feel free to weigh in via the comments section on any of his IPO Playbook posts.